Sanguine global cues prop up Indian equities; benchmarks revisit crucial levels

Indian stock indices have managed to capitalize on the initial momentum and are trading at the session’s high levels in the Wednesday afternoon trades as sentiments got fortified further following the encouraging cues from Asian peers. The benchmark indices spurted in the session to the highest levels in around six months owing to persistent foreign fund inflows, an appreciating rupee and moderating inflationary pressures on the economy. Tentative improvement in investors’ risk taking ability was also  evident as reports showed that the Greek conservative party leader would deliver a letter of commitment to lenders, indicating that the debt laden country is willing to commit to spending cuts demanded by lenders in exchange for a bailout. The BSE’s thirty share sensitive index - Sensex has sustained its northbound journey and has even gone on to re-conquer the psychological 18,150 levels rallying over three hundred points thanks to the broad based short covering across the sectoral space. Investors relentlessly piled up hefty positions in the rate sensitive counters like Realty, Banking and Auto on speculations that the better than expected January inflation numbers will increase the pressure on RBI will now to employ monetary easing measures to prop up the country's economy growth momentum. However, index heavyweight Reliance Industries failed to sway with the sanguine momentum amid expectations that gas output from its D6 block, which currently produces about 37 million standard cubic metres a day (mmscmd) of gas, is expected to fall by about 10% to 34 mmscmd by April. On the global front, Asian markets are trading on an enthusiastic note while European stock futures too are indicating a higher opening for the markets there after China's Premier has vowed that his country will continue to invest in European government debt to help resolve the debt crisis.

Moreover, the broader markets too rallied with fervor with around one and half a percent gains, performing in tandem with their larger peers. The bourses rallied on large volumes of over Rs 1 lakh crore while market breadth on BSE was dominantly in favor of advances in the ratio of 1797:904 while 126 scrips remained unchanged.

The BSE Sensex is currently trading at 18,159.21 up by 310.64 points or 1.74% after trading as high as 18,167.65 and as low as 18,000.30. There were 28 stocks advancing against 2 declines on the index.

The broader indices were trading on a positive note; the BSE Mid cap index surged 1.96% and Small cap soared 1.38%.

On the BSE sectoral space, Realty up 3.90%, Auto up 3.86%, Capital Goods up 3.37%, Consumer Durables up 2.84% and Bankex up 2.43% were the major gainers while Oil & Gas down 0.01% was the only loser in the space.

Tata Motors up 7.30%, L&T up 4.40%, DLF up 4.39%, M&M up 4% and Sterlite up 3.72% were the major gainers on the Sensex, while RIL down 1.02% and HUL down 0.46% were the only losers in the index.

Meanwhile, RBI deputy governor Subir Gokarn has said that an easing in inflation in January indicates downward trend and underlines the fact that the rate cycle has peaked. Gokarn further stated that the headline inflation at 6.55% is in line with Reserve Bank of India’s (RBI) expectations and so is the non-food manufacturing inflation, which stood at 6.49% in January. 

However, as per Gokran, there still remain issues that can cause concern like a jump in oil prices in the future and the possibility of food inflation going back into positive territory. The RBI has put a year-end target of headline inflation at 6%. Gokran has however refrained from commenting on the possibility of another CRR cut by the apex bank. Inflation for the month of January 2012 fell to 6.55%, as compared to 7.47% in December 2011. It has been lower than the generally expected number of 6.7% and has confirmed the downward movement of prices, fuelling hopes of further rate cuts by the RBI in the future.

The RBI had ushered in a series of 13 consecutive hikes over a 19-month period till December last year to tame the uncomfortably high inflation. This adversely affected growth in fixed capital formation and in turn GDP growth. Due to the recent fall in inflation numbers in December, the RBI cut the CRR by half a percent. Though it helped to ease liquidity, it continues to be beyond the comfort zone with banks drawing almost Rs 1 lakh crore through the overnight window. With continued easing of inflation in January, it is expected that the apex bank could ease liquidity further.

The S&P CNX Nifty is currently trading at 5,519.40, higher by 103.35 points or 1.91% after trading as high as 5,521.90 and as low as 5,460.60. There were 47 stocks advancing against 3 declines on the index.

The top gainers on the Nifty were Tata Motors up 7.50%, JP Associates up 5.97%, Axis Bank up 5.55%, L&T up 4.86% and DLF up 4.65%.

Reliance down 1.05%, HUL down 0.69% and Cairn down 0.25% were the only losers on the index.

In the Asian space, Shanghai Composite climbed 0.87%, Hang Seng jumped 2.25%, Jakarta Composite added 0.07%, Nikkei 225 soared 2.30%, Straits Times advanced 0.68%, Seoul Composite surged 1.13% and Taiwan Weighted garnered 1.54%.